8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (date of earliest event reported): January 25, 2010

Adobe Systems Incorporated

(Exact name of Registrant as specified in its charter)

Delaware	0-15175	77-0019522
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

345 Park Avenue
San Jose, California 95110-2704

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 536-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 5 — Corporate Governance and Management

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)2010 Performance Share Program

On January 25, 2010, the Executive Compensation Committee of the Board of Directors (the “Committee”) of Adobe Systems Incorporated (the “Company”) approved the Form of Performance Share Program (the “Program”) under the terms of the Company’s 2003 Equity Incentive Plan.  The Committee established the Program to (i) help focus key employees on achieving specific performance targets, (ii) reinforce a team orientation, (iii) provide significant award potential for achieving outstanding performance, and (iv) enhance the ability of the Company to attract and retain highly talented and competent individuals.  Certain members of the Company’s executive management team and other key members of senior management have been selected by the Committee to participate in the Program for fiscal year 2010.   The Committee granted awards for the executive officers under the Program on January 25, 2010 in the form of a target award and a Maximum Award (as defined below) of performance shares approved pursuant to the terms of the Company’s 2003 Equity Incentive Plan.

The Program requires that the Company achieve an established performance goal as an initial threshold in order to earn any performance shares under the Program. If the initial threshold is met, the Program then provides for the calculation of the performance shares actually earned.

For fiscal year 2010, the initial threshold and Other Performance Goals (as defined below) are set, including metrics that determine the actual number of performance shares earned, in the 2010 Award Calculation Methodology adopted as part of the Program.  The Award Calculation Methodology requires that the Company achieve at least 80% of the GAAP revenue target approved by the Board under the annual operating plan as an initial threshold before participants may earn any performance shares under the Program.  If the initial threshold is not achieved, all participants forfeit their entire award.  If this initial threshold is achieved, the actual number of performance shares earned by each participant is set at 150% of his or her target incentive amount (the “Maximum Award”), subject to a reduction based on the level of achievement of five sets of strategic objectives approved by the Committee (the “Other Performance Goals”) which will determine the actual award earned. For each set of Other Performance Goals, the calculation is as follows:

Other
Performance Goal
Weight (20%) x Number of
Performance Shares in
Target Award x Other
Performance Goal
Achievement % = Earned
Performance
Shares

All five sets of Other Performance Goals are weighted equally (20%) and the Other Performance Goal Achievement % for each set of Other Performance Goals is capped at 150%. The actual award earned equals the sum of the Earned Performance Shares determined using the equation above for all five sets of Other Performance Goals.  Any partial share of an actual award shall be rounded up to the next whole share.

Performance shares will be earned (if at all) upon certification by the Committee of actual performance achievement following the Company’s 2010 fiscal year-end, subject to specified change of control exceptions.  In addition, as a condition to earning any part of the Maximum Award, a participant must be employed by the Company through the first anniversary of the grant date to be eligible.

2

Earned performance shares will vest as to 1/3 of the total number of earned performance shares on the date the Committee certifies achievement of the applicable metrics, or the first anniversary of the grant date, whichever is later.  Thereafter, the earned performance shares are subject to time-based vesting and will vest as to 1/3 of the total number of earned performance shares each year on the second and third anniversaries of the grant date, contingent upon the participant’s continued service to the Company.

The target awards and Maximum Awards for the performance shares granted to the Company’s principal executive officer, principal financial officer and other named executive officers* on January 25, 2010 are as follows:

Officer	Title	TargetAward	Maximum Award
Shantanu Narayen	President and Chief Executive Officer	95,000	142,500
Mark Garrett	Executive Vice President and Chief Financial Officer	16,000	24,000
Johnny Loiacono	Senior Vice President, Creative Solutions Business Unit	13,000	19,500
Kevin Lynch	Senior Vice President, Chief Technology Officer	16,000	24,000
Matthew Thompson	Senior Vice President, Worldwide Field Operations	14,000	21,000

* For purposes of this filing, the term “named executive officer” refers to executive officers for whom disclosure was required in our most recent filing with the Securities Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934 that required disclosure pursuant to Item 402(c) of Regulation S-K.

A participant may receive less than his or her target award, and in no event may an actual payout exceed the Maximum Award.

The description of the Program contained herein is a summary of the material terms of the Program, does not purport to be complete and is qualified in its entirety by reference to the Program used in connection with the 2003 Equity Incentive Plan.  A copy of the Program, the Form of Award Grant Notice and Performance Share Award Agreement for use in connection with grants under this Program and the 2010 Award Calculation Methodology is attached hereto as Exhibit 10.1, Exhibit 10.2 and 10.3, respectively, to this Current Report on Form 8-K.

2010 Executive Annual Incentive Plan

On January 25, 2010, the Committee approved the terms of the 2010 Executive Annual Incentive Plan (the “Bonus Plan”), adopted pursuant to the Executive Cash Performance Bonus Plan, which is applicable to certain executive officers of the Company.  The Bonus Plan is designed to (i) drive revenue growth and operating profits, (ii) encourage accountability, (iii) drive execution of long-term strategy and annual operating plan objectives, and (iv) recognize and reward executives upon the achievement of the Company’s objectives. Executive officers of the Company who are employed during the eligibility period (fiscal year), are Senior Vice President level or above and are regular employees of Adobe at the end of the eligibility period are eligible to participate in the Bonus Plan. Pursuant to the Bonus Plan, each participant is eligible to receive an incentive bonus calculated as a percentage of the executive’s earned base salary.

The Bonus Plan requires that the Company achieve at least 90% of the GAAP revenue target approved by the Board under the annual operating plan as a minimum performance threshold before participants may earn any incentive bonus under the Bonus Plan.  If the initial threshold is not achieved, no payments are made under the Bonus Plan.  If this initial threshold is achieved, each participant is eligible to earn a maximum bonus (the “Maximum Bonus”) equal to 200% of such participant’s annual bonus target, up to a maximum of $5 million, subject to reduction as described below.  The target bonus

3

is calculated by multiplying the participant’s base salary earned during the fiscal year by a Committee-approved target bonus percentage.  The actual bonus earned by each participant is calculated as described below.

For fiscal year 2010, the target bonus and Maximum Bonus, expressed as a percentage of annual base salary for the Company’s principal executive officer, principal financial officer and other named executive officers, are as follows:

Officer	Title	TargetBonus		Maximum Bonus
Shantanu Narayen	President and Chief Executive Officer	125	%	250	%
Mark Garrett	Executive Vice President and Chief Financial Officer	100	%	200	%
Johnny Loiacono	Senior Vice President, Creative Solutions Business Unit	75	%	150	%
Kevin Lynch	Senior Vice President, Chief Technology Officer	75	%	150	%
Matthew Thompson	Senior Vice President, Worldwide Field Operations	100	%	200	%

The Maximum Bonus for each participant is subject to reduction based on the Company’s achievement, as determined under a matrix, of adjusted revenue (GAAP revenue adjusted to reflect the shippable backlog at the end of the fiscal year and to disregard the effects of any material acquisitions not incorporated into the operating plan) and adjusted non-GAAP operating profit (non-GAAP operating profit, adjusted to include the operating profit associated with shippable backlog at the end of the fiscal year and to exclude profit sharing, quarterly incentive plan payments and annual incentive plan payments, as well as the effects of any material acquisitions not incorporated into the operating plan; Adobe’s non-GAAP operating profit excludes the stock-based compensation impact of Statements of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123R”), “Share Based Payment,” deferred compensation expense, restructuring charges, and amortization of purchased intangibles, technology license arrangements and incomplete technology). These two metrics, expressed as a percentage, form the “Corporate Result.”

The Maximum Bonus is also subject to reduction based on each individual’s level of achievement of specified individual performance goals.  The results of these individual metrics, expressed as a percentage, form the “Individual Result.”  The Individual Result percentage may not exceed 200%.

The Corporate Result and Individual Result are used in the calculation of the actual bonus payable under the Bonus Plan as follows:

Participant Target Bonus  x  Corporate Result  x  Individual Result

For purposes of the above calculation, the Corporate Result is capped at 100%. The Individual Result multiplier is capped at 100% if the Corporate Result does not exceed 100%.  If the Corporate Result exceeds 100%, the Individual Result multiplier may reflect, in the Committee’s discretion, the individual’s contribution toward the achievement of the Corporate Result level in excess of 100%.  No participant will earn an actual bonus under the Bonus Plan in excess of his or her target bonus unless the Corporate Result exceeds 100% and the participant’s overall individual result exceeds 100%.

A 5% reduction will be applied to the actual bonus otherwise earned by any executive who fails to meet the annual performance appraisal submission deadline. A separate 5% reduction will be applied to the actual bonus otherwise earned by any executive who fails to timely complete mandatory training during the fiscal year.

4

The description of the Bonus Plan contained herein is a summary of the material terms of the Bonus Plan, does not purport to be complete, and is qualified in its entirety by reference to the Bonus Plan summary. A copy of the Bonus Plan summary is attached to this Current Report on Form 8-K as Exhibit 10.4.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Date	Number	Herewith
10.1	Form of Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.2	Form of Award Grant Notice and Performance Share Award Agreement pursuant to the 2003 Equity Incentive Plan				X
10.3	Award Calculation Methodology to the 2010 Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.4	2010 Executive Annual Incentive Plan				X

5

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADOBE SYSTEMS INCORPORATED
Date: January 29, 2010	By:	/s/ KAREN O. COTTLE
		Karen O. Cottle
		Senior Vice President, General Counsel and Secretary

6

EXHIBIT LIST

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Date	Number	Herewith
10.1	Form of Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.2	Form of Award Grant Notice and Performance Share Award Agreement pursuant to the 2003 Equity Incentive Plan				X
10.3	Award Calculation Methodology to the 2010 Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.4	2010 Executive Annual Incentive Plan				X

7

EX-10.1

Exhibit 10.1

ADOBE SYSTEMS INCORPORATED

2003 EQUITY INCENTIVE PLAN

[           ] PERFORMANCE SHARE PROGRAM

ADOPTED: [                              ]

1.Purpose.  The Adobe Systems Incorporated [       ] Performance Share Program (the “Program”), established under the Adobe Systems Incorporated 2003 Equity Incentive Plan (the “Plan”), is intended to provide equity incentive compensation to individuals who make a significant contribution to the performance of Adobe Systems Incorporated (the “Company”).  Program objectives are to:  (i) focus key Employees on achieving specific performance targets, (ii) reinforce a team orientation, (iii) provide significant award potential for achieving outstanding performance, and (iv) enhance the ability of the Company to attract and retain highly talented and competent individuals.

2.Definitions.

Defined terms not explicitly defined in this Program but defined in the Plan shall have the same definitions as in the Plan.

(a)“Actual Award” means the number of shares of Stock credited to a Designated Participant under the Program during a Performance Period based on achievement of applicable Performance Goals and Other Performance Goals.

(b)“Board” means the Board of Directors of the Company.

(c)“Certification Date” means the date on which the Committee certifies whether the Performance Goals have been met under the Performance Award Formula and whether any reductions in the Maximum Awards should be made on account of the degree of achievement of the Other Performance Goals.

(d)“Committee” means a committee of one or more members of the Board appointed by the Board pursuant to the Plan; provided, however, that for purposes of administering the Plan with respect to Designated Participants who are or may be deemed “covered employees” (as defined for purposes of Section 162(m) of the Code), the “Committee” shall be composed of two or more members of the Board, each of whom is an “outside director” for purposes of Section 162(m) of the Code.

(e)“Disability” means, with respect to a Designated Participant, the inability of such Designated Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code.

(f)“Designated Participant” means a key Employee of the Company or any other Participating Company who is designated by the Committee in writing to participate in the Program.

(g)“Maximum Award” means the maximum number of shares of Stock that may be credited to a Designated Participant under the Program in respect of a specified Performance Period if the applicable Performance Goals are achieved at the levels set by the Committee during the applicable

1

Performance Period and the Designated Participant continues to render Service to the Company or any other Participating Company during the entire Performance Period.

(h)“Other Performance Goal” means a Performance Goal established by the Committee pursuant to Section 9.3 of the Plan that is used to determine any reduction in the Maximum Award.

(i)“Performance Period” means the period of time selected by the Committee over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Designated Participant’s right to an Actual Award.  At the discretion of the Committee, a Performance Period may be divided into shorter periods (for example, fiscal years of the Company) over which the attainment of one or more Performance Goals will be measured.

3.How Awards Are Earned Under the Program.

(a)General Program Description.  The Program provides the opportunity for certain key Employees to earn shares of Stock based on the performance of the Company.  In general, the Committee will select certain key Employees to participate in the Program at the beginning of a Performance Period.  Upon selection to participate in the Program, each such Designated Participant will be granted a Maximum Award equal to the number of shares of Stock that will be represented by an Actual Award to such Designated Participant if (i) specified levels of applicable Performance Goals are achieved during the Performance Period, (ii) the Committee does not reduce the Maximum Award on account of the degree of achievement of applicable Other Performance Goals, and (iii) the Designated Participant continues to render Service to the Company or any other Participating Company during the entire Performance Period and any subsequent additional vesting period.  If the Committee does reduce the Maximum Award on account of the degree of achievement of applicable Other Performance Goals, the Designated Participant will be awarded a portion (or none) of the shares of Stock subject to the Maximum Award; provided, however, that (i) if the specified level of Performance Goals is not achieved during the Performance Period, the Designated Participant will not receive any shares of Stock, and (ii) the maximum number of shares of Stock that a Designated Participant may receive as an Actual Award will in no event exceed the Maximum Award.  The methodology for the operation of the Program in terms of establishing the Maximum Award based on the levels of achievement of the Performance Goals and the determination of whether the Maximum Award, or some portion of it, will become payable to a Designated Participant as an Actual Award in respect of a Performance Period is set forth in the attached Exhibit A.  As required by Section 5.4(b)(iii) of the Plan and in accordance with Section 162(m) of the Code, in no event may a Maximum Award be granted to a Designated Participant such that the number of shares of Stock that could be earned by such Designated Participant as an Actual Award would exceed two hundred thousand (200,000) shares of Stock for each full fiscal year of the Company contained in the Performance Period for such Actual Award.

(b)Designated Participants.  Each key Employee of the Company or any other Participating Company who is designated by the Committee in writing for participation in the Program for a particular Performance Period shall be eligible for a Maximum Award with respect to such Performance Period.  The Committee may designate a key Employee who commences Service after the beginning of a particular Performance Period as eligible to receive a prorated Maximum Award for such Performance Period.  The determination as to whether an individual is a Designated Participant shall be made by the Committee, in its sole discretion, and such determination shall be binding and conclusive on all persons.

No Employee shall have any right to be a Designated Participant in the Program, to continue as a Designated Participant, or to be granted a Maximum Award or Actual Award under the

2

Program.  The Company is not obligated to give uniform treatment (e.g., number of shares subject to Maximum Awards) to Employees or Designated Participants under the Program.  Participation in the Program as to a particular Performance Period does not convey any right to participate in the Program as to any other Performance Period.

(c)Performance Goals and Other Performance Goals.  The Performance Goals for a particular Performance Period and Other Performance Goals, if applicable, and their relative weights, will be determined by the Committee, in its sole discretion. The Committee also may establish, in its sole discretion, Performance Goals and Other Performance Goals for annual, quarterly or other periods within the applicable Performance Period.  The Performance Goals and Other Performance Goals for a Performance Period or for shorter periods within a Performance Period are not required to be identical to the Performance Goals and Other Performance Goals for any other Performance Period or shorter period within a Performance Period.  The Committee may establish Performance Goals and Other Performance Goals for the Company that differ from those established for one or more other Participating Companies and may establish different Performance Goals and Other Performance Goals for each Designated Participant or for groups of Designated Participants.

4.Other Program Provisions.

(a)Distribution of Actual Awards.  Assessment of actual performance, determination of Actual Awards and the distribution of shares of Stock in respect of Actual Awards will be subject to (i) certification by the Committee that the applicable Performance Goals and other terms of the Program have been met, (ii) the Committee’s determination as to the appropriate reductions, if any, in the amounts of the Maximum Awards in arriving at the amounts of the Actual Awards, based on the levels of achievement of applicable Other Performance Goals, and (iii) the completion of any subsequent additional vesting period.  Unless an Actual Award provides otherwise, shares of Stock that are credited to a Designated Participant as an Actual Award will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) within thirty (30) days following the applicable vesting date.  Notwithstanding the foregoing, if the Company has provided a Designated Participant with a plan or program by which to defer distribution of such shares of Stock and the Designated Participant has made an effective election to defer such distribution under such plan or program, such shares will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) in accordance with such election.  The Company shall withhold shares of Stock otherwise deliverable to the Designated Participant in satisfaction of any federal, state or local tax withholding obligation relating to the delivery of Stock under the Actual Award, but the Company shall not withhold a number of shares with a fair market value in excess of the applicable tax withholdings determined by application of the minimum required statutory rates.

(b)Employment and Termination.  In order to receive shares of Stock in respect of an Actual Award under the Program, a Designated Participant must continue to render Service to the Company or any other Participating Company during the entire Performance Period, and for any subsequent additional vesting period, except as otherwise provided under the terms of the applicable award agreement.

(c)No Employment or Service Rights.  Nothing in the Program or any instrument executed or Award granted pursuant to the Program shall (i) confer upon any Employee or Designated Participant any right to continue to be retained in the employ or service of the Company or any other Participating Company, (ii) change the at-will employment relationship between the Company or any other Participating Company and an Employee or Designated Participant, or (iii) interfere with the right of the Company or any other Participating Company to discharge any Employee, Designated Participant or other person at any time, with or without cause, and with or without advance notice.

3

A.Program Administration.  The Committee shall be responsible for all decisions and recommendations regarding Program administration and retains final authority regarding all aspects of Program administration, the resolution of any disputes, and application of the Program in any respect to a Designated Participant.  All determinations and interpretations made by the Committee in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.  The Committee may, without notice, amend, suspend or terminate the Program; provided, however, that no such action may adversely affect any then outstanding Award unless (i) expressly provided by the Committee and (ii) with the consent of the Participant, unless such action is necessary to comply with any applicable law, regulation or rule.

B.Stockholder Rights.No Designated Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to a Maximum Award (including, without limitation, the right to receive dividends) unless and until such Designated Participant has received an Actual Award under the Program, has vested in the shares subject to the Actual Award and has received delivery of such shares; provided, however, that a plan or program by which receipt of shares of Stock in respect of an Actual Award may be deferred may provide for the crediting of dividend equivalent rights.

(d)Validity.  If any provision of the Program is held invalid, void, or unenforceable, the same will not affect, in any respect whatsoever, the validity of any other provision of the Program.

(e)Governing Plan Document.  The Program is subject to all the provisions of the Plan and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted by the Committee, the Board or the Company pursuant to the Plan.  In the event of any conflict between the provisions of this Program and those of the Plan, the provisions of the Plan shall control.

4

EXHIBIT A

[               ] PERFORMANCE SHARE PROGRAM

AWARD CALCULATION METHODOLOGY

[To Be Approved Annually]

EX-10.2

Exhibit 10.2

ADOBE SYSTEMS INCORPORATED

2003 EQUITY INCENTIVE PLAN

[          ] PERFORMANCE SHARE PROGRAM

AWARD GRANT NOTICE

Adobe Systems Incorporated (the “Company”), pursuant to its [         ] Performance Share Program (the “Program”) under its 2003 Equity Incentive Plan (the “Plan”), hereby awards to Participant the award (the “Award”) set forth below.  This Award is subject to all of the terms and conditions as set forth herein and in the Performance Share Award Agreement, the Program and the Plan, all of which are attached hereto and incorporated herein in their entirety.  Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable.

Participant:
Date of Grant:
Vesting Commencement Date:
Number of Shares of Stock Subject to Target Award:	[              ] shares of Stock
Number of Shares of Stock Subject to Maximum Award:	[          ]% of number of shares of Stock subject to Target Award
Performance Period:	Company’s Fiscal Year [          ]

Determination of Actual Award:  On the Certification Date, and provided that (i) the applicable Performance Goal is attained during the Performance Period and (ii) Participant continues to render Service to the Company or any other Participating Company through the Certification Date, the Company shall credit Participant with an Actual Award representing the number of shares of Stock (which may be equal to all or a portion (including none) of the Maximum Award) as determined by the Committee based on the degree of achievement of the Other Performance Goals as determined by the Executive Compensation Committee of the Board of Directors of the Company and the limitations set forth in Section 5 of the Performance Share Award Agreement.

Vesting Schedule:   The Actual Award shall vest as to 1/3rd of the shares of Stock subject to the Actual Award on the later of (i) the Certification Date and (ii) the one year anniversary of the Vesting Commencement Date (the “First Vesting Date”), and thereafter as to 1/3rd of the shares of Stock subject to the Actual Award on each of the second and third anniversaries of the Vesting Commencement Date (each such date, a “Vesting Date”), so that the Actual Award will be fully vested as of the third anniversary of the Vesting Commencement Date; provided, however, that the Participant continues to render Service to the Company or any other Participating Company through each such vesting date.

Delivery of Shares:   Subject to the limitations contained herein and the provisions of the Plan and the Program, the Company shall deliver to the Participant the vested shares of Stock subject to the Actual Award as provided in Section 3 of the Performance Share Award Agreement.

Additional Terms/Acknowledgements:  The Participant acknowledges receipt of, and understands and agrees to, this Award Grant Notice, the Performance Share Award Agreement, the Program and the Plan.  Participant further acknowledges that as of the Date of Grant, this Award Grant Notice, the Performance Share Award Agreement, the Program, and the Plan set forth the entire understanding between Participant and the Company regarding the Award and supersede all prior oral and written agreements on that subject, with the exception of the Adobe Systems Incorporated Executive Severance Plan in the Event of a Change of Control and/or an individual written retention agreement or severance provision in effect on the Date of Grant between the Company, or a subsidiary of the Company, and the Participant, to the extent applicable to the Participant (such documents, the “Superseding Agreements”).  This Award is a “performance share unit” for purposes of the Superseding Agreements.

ADOBE SYSTEMS INCORPORATED
By:
	Shantanu Narayen
	Chief Executive Officer
Address:		345 Park Avenue
		San Jose, CA 95110-2704 USA

ADOBE SYSTEMS INCORPORATED

2003 EQUITY INCENTIVE PLAN

[          ] PERFORMANCE SHARE PROGRAM

PERFORMANCE SHARE AWARD AGREEMENT

Pursuant to the Award Grant Notice (“Grant Notice”) and this Performance Share Award Agreement (“Award Agreement”), Adobe Systems Incorporated (the “Company”) has awarded you, pursuant to its [       ] Performance Share Program (the “Program”) under its 2003 Equity Incentive Plan (the “Plan”), the Maximum Award as indicated in the Grant Notice.  Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable.

The details of your Award are as follows.

1.ENTITLEMENT TO SHARES.

(a)Determination of Actual Award.

(i)Generally. Provided that (i) the applicable Performance Goal is achieved during the Performance Period and (ii) you continue to render Service to the Company or any other Participating Company through the Certification Date, then, subject to the limitations contained herein and to the provisions of the Program and the Plan, you shall be credited with an Actual Award on the Certification Date equal to all or a portion (including none) of the Maximum Award, with a reduction from the Maximum Award determined by the Committee based on the degree of achievement of the Other Performance Goals as determined by the Executive Compensation Committee of the Board of Directors of the Company and, as applicable, based on any reduction pursuant to Section 5 of this Award Agreement.  If the Committee does reduce the Maximum Award on account of the degree of achievement of Other Performance Goals, you will be credited with a portion (or none) of the shares of Stock subject to the Maximum Award; provided, however, that (i) if a specified level of Performance Goals (including all Other Performance Goals) is not achieved during the Performance Period, you will not be credited with or receive any shares of Stock as an Actual Award, and (ii) the maximum number of shares of Stock for which you may be credited as an Actual Award will in no event exceed the Maximum Award.

(ii)Change of Control.  If a Change of Control occurs prior to the Certification Date, and provided you continue to render Service to the Company or any other Participating Company until immediately prior to the Change of Control, then, as of immediately prior to the Change of Control, you shall be credited with a pro-rated Actual Award on such date equal to that number of shares of Stock subject to the Target Award multiplied by a fraction, the numerator of which is the number of months of Service (rounded up for any partial months and subject to reduction pursuant to Section 5) you provided in the Performance Period as of immediately prior to the Change of Control (but in no event shall you be credited with more than the number of months in the Performance Period) and the denominator of which is the number of months in the Performance Period.

(b)Vesting.  The Actual Award shall be subject to vesting in accordance with the Vesting Schedule set forth on the Grant Notice, subject to such acceleration as provided in Section 1(c) of this Award Agreement or Superseding Agreement, as applicable.

(c)Disability or Death.

(i)If your Service terminates prior to the Certification Date by reason of death or Disability, you (or your heirs in the case of death) will be credited with a pro-rated Actual Award equal to that number of shares of Stock that you would have been credited with pursuant to Section 1(a) had you remained in Service through the applicable date set forth in Section 1(a), with pro-ration based on the number of months of Service (rounded up for any partial months of Service and subject to reduction pursuant to Section 5) you provided in the Performance Period prior to your termination (but in no event shall you be credited with more than the

1

number of months in the Performance Period).  For clarification, if the Actual Award is determined pursuant to Section 1(a)(ii), the Actual Award will not be pro-rated twice.  You will be deemed to have vested in that 1/3rd of the shares of Stock subject to the Actual Award that would have vested on the First Vesting Date.

(ii)If your Service terminates on or after the Certification Date, you will be deemed to have vested in that 1/3rd of the shares of Stock subject to the Actual Award that would have vested on the next Vesting Date (which may be the First Vesting Date if the Certification Date occurs prior to the first anniversary of the Vesting Commencement Date).

(iii)The shares of Stock subject to an Actual Award that vest pursuant to this Section 1(c) shall be issued and delivered to you (or your heirs in the case of death) pursuant to Section 3 below.

2.DIVIDENDS. Except as provided in Section 6 below, you shall not receive or be credited with any payment or other adjustment in the number of shares subject to the Actual Award for cash dividends that may be made in respect of the shares of Stock to which your Actual Award relates unless and until, and only to the extent, such Actual Award has vested.

3.DELIVERY OF SHARES.  Subject to Sections 4 and 12 of this Award Agreement, the Company shall issue and deliver to you (or your heirs in the case of death) the certificates representing the shares of Stock subject to a vested Actual Award (the “Certificates”) within thirty (30) days following the applicable vesting date.  If you elect to defer delivery of the shares of Stock as provided in Section 4 of this Award Agreement, shares of Stock will be issued and delivered to you on the date or dates that you elect on your deferral election form.  The Certificates shall be in such form as is determined by the Company.  No shares of Stock shall be issued prior to vesting.

4.DEFERRAL ELECTION.  If permitted by the Company to do so, you may elect to defer receipt of the shares of Stock that would otherwise be issued pursuant to the vesting of your Award in accordance with the terms and conditions, including the applicable eligibility requirements, of the Company’s Deferred Compensation Plan.  The Board (or an appropriate committee thereof) will, in its sole discretion, establish the rules and procedures for such deferrals.

5.EFFECT OF LEAVES OF ABSENCE.  Unless otherwise required by law, if you have taken in excess of thirty (30) days of leaves of absence during a Performance Period, your Actual Award shall be prorated on the basis of the number of days of Service during the Performance Period during which you were not on a leave of absence.

6.NUMBER OF SHARES.  The number of shares of Stock subject to your Award will be adjusted from time to time for capitalization adjustments, as provided in Section 4.2 of the Plan.

7.SECURITIES LAW COMPLIANCE.  The grant of your Award and the issuance of any shares of Stock pursuant to an Actual Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  You may not be issued any shares of Stock pursuant to an Actual Award if the issuance of shares of Stock would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  In addition, you may not be issued any shares of Stock pursuant to an Actual Award unless (i) a registration statement under the Securities Act shall at the time of issuance be in effect with respect to the shares of Stock or (ii) in the opinion of legal counsel to the Company, the shares of Stock may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.  YOU ARE CAUTIONED THAT THE SHARES OF STOCK MAY NOT BE ISSUED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares of Stock pursuant to an Actual Award shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the issuance of any shares of Stock pursuant to an Actual Award, the Company may require you to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

2

8.RESTRICTIVE LEGENDS.  The shares of Stock issued pursuant to an Actual Award shall be endorsed with appropriate legends, if any, determined by the Company.

9.TRANSFERABILITY.  Your Award and any unvested shares of Stock subject to the Actual Award are not transferable, except by will or by the laws of descent and distribution.  Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares of Stock pursuant to Section 3 of this Award Agreement.

10.AWARD NOT A SERVICE CONTRACT.  Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Company or the Participating Company Group, or on the part of the Company or Participating Company Group to continue such service.  In addition, nothing in your Award shall obligate the Company or the Participating Company Group, their respective stockholders, boards of directors, Officers or Employees to continue any relationship that you might have as an Employee, Director or Consultant for the Company or the Participating Company Group.

11.UNSECURED OBLIGATION.  Your Award is unfunded, and you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Stock pursuant to an Actual Award under this Award Agreement.  You shall not have voting or any other rights as a stockholder of the Company with respect to the Stock acquired pursuant to this Award Agreement until such Stock is issued to you pursuant to this Award Agreement.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the Stock so issued.  Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

12.WITHHOLDING OBLIGATIONS.  Regardless of any action taken by the Company or the Participating Company Group with respect to any or all income, employment, social insurance, or payroll taxes, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and Participating Company Group (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of your Award, the subsequent sale of shares of Stock acquired pursuant to an Actual Award, or the receipt of any dividends and (ii) does not commit to structure the terms of the grant or any other aspect of your Award to reduce or eliminate your liability for Tax-Related Items.  At the time any Actual Award is determined, at the time you vest in such Actual Award, at the time you receive a distribution of shares of Stock pursuant to such Actual Award, or at any other time reasonably as requested by the Company or the Participating Company Group, you shall pay or make adequate arrangements satisfactory to the Participating Company Group to satisfy all withholding obligations of the Participating Company Group.  In this regard, at the time you receive a distribution of shares of Stock pursuant to an Actual Award, or at any other time as reasonably requested by the Company or the Participating Company Group, you hereby authorize the withholding of that number of whole vested shares of Stock otherwise deliverable to you pursuant to an Actual Award under this Award Agreement having a fair market value not in excess of the amount of the Tax-Related Items determined by the applicable minimum statutory rates.  Finally, you shall pay to the Company or Participating Company Group (as applicable) any amount of the Tax-Related Items that the Company or the Participating Company Group may be required to withhold as a result of your participation in the Plan that cannot be satisfied by the means previously described.  The Company and the Participating Company Group shall have no obligation to deliver shares of Stock until you have satisfied the obligations in connection with the Tax-Related Items as described in this section.

13.NATURE OF AWARD.  In accepting your Award, you acknowledge that:

(a)the Plan is established voluntarily by the Company; it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan, Program and this Award Agreement;

3

(b)the grant of your Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;

(c)all decisions with respect to future Awards under the Plan, if any, will be at the sole discretion of the Committee;

(d)your participation in the Plan shall not create a right to further employment with the Company or the Participating Company Group and shall not interfere with any ability of the Company or the Participating Company Group to terminate your employment relationship at any time with or without cause;

(e)you are voluntarily participating in the Plan;

(f)an Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(g)in the event that you are not an employee of the Company, your Award will not be interpreted to form an employment contract or relationship with the Company; and furthermore, your Award will not be interpreted to form an employment contract with the other members of the Participating Company Group;

(h)the future value of the shares of Stock subject to your Award is unknown and cannot be predicted with certainty; and

(i)no claim or entitlement to compensation or damages arises from termination of your Award or diminution in value of your Award or shares of Stock issued pursuant to an Actual Award resulting from termination of your Service with the Company or the Participating Company Group (for any reason whether or not in breach of applicable labor laws), and you irrevocably release the Company and the Participating Company Group from any such claim that may arise.  If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, by executing the Grant Notice, you shall be deemed irrevocably to have waived your entitlement to pursue such a claim.

14.DELIVERY OF DOCUMENTS AND NOTICES.  Any document relating to participating in the Plan or Program and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the e-mail address, if any, provided for you by the Company or a Participating Company or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery.  The Plan and Program documents, which may include but do not necessarily include the Plan prospectus, Grant Notice, Award Agreement, Certificates, and U.S. financial reports of the Company, may be delivered to you electronically.  Such means of delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Committee’s discretion.

(b)Consent to Electronic Delivery.  You acknowledge that you have read Section 14 of this Award Agreement and consent to the electronic delivery of the Plan and Program documents, as described in Section 14 of this Award Agreement.  You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at equity@adobe.com.  You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide the Company or any designated third party with a paper copy of any documents delivered electronically if electronic delivery fails.  Also, you understand that your consent may be revoked or changed, including any change in the

4

electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at equity@adobe.com.  Finally, you understand that you are not required to consent to electronic delivery.

15.DATA PRIVACY CONSENT.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among the members of the Participating Company Group for the exclusive purpose of implementing, administering and managing your participation in the Plan and Program.

You understand that the Company and the Participating Company Group hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of Stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan and Program (“Data”).  You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan or Program, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country.  You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative.  You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom you may elect to deposit any shares of Stock pursuant to an Actual Award.  You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative.  You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan or Program.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

16.APPLICATION OF SECTION 409A.  Notwithstanding any other provision of this Award Agreement, to the extent that (i) one or more of the payments or benefits received or to be received by a Participant pursuant to this Award Agreement would constitute deferred compensation subject to the requirements of Code Section 409A, and (ii) you are a “specified employee” within the meaning of Code Section 409A, then such payment or benefit (or portion thereof) will be delayed until the earliest date following your “separation from service” with the Participating Company Group within the meaning of Code Section 409A on which the Company can provide such payment or benefit to you without your incurrence of any additional tax or interest pursuant to Code Section 409A, with all payments or benefits due thereafter occurring in accordance with the original schedule.  In addition, this Award and the payments and benefits to be provided hereunder are intended to comply in all respects with the applicable provisions of Code Section 409A.

17.HEADINGS.  The headings of the Sections in this Award Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Award Agreement or to affect the meaning of this Award Agreement.

18.AMENDMENT.  The Committee may, without notice, amend, suspend or terminate the Program; provided, however, that no such action may adversely affect any then outstanding Award unless (i) expressly provided by the Committee and (ii) with the consent of you, unless such action is necessary to comply with any applicable law, regulation or rule.

19.MISCELLANEOUS.

(a)The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.

5

(b)You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

(c)You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.

20.GOVERNING PLAN DOCUMENT.  Your Award is subject to all the provisions of the Plan and Program, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan or Program.  In the event of any conflict between the provisions of your Award and those of the Plan or Program, the provisions of the Plan or Program shall control.  In the event of any conflict between the provisions of the Plan or Program, the provisions of the Plan shall control.

21.APPLICABLE LAW.  This Award Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

6

EX-10.3

Exhibit 10.3

2010 PERFORMANCE SHARE PROGRAM

AWARD CALCULATION METHODOLOGY

Parameter	Description
Designated Participants	Senior Vice Presidents and above (or equivalent) as designated by the Committee.
Performance Period	The Company’s 2010 fiscal year.
Award Agreement	A Maximum Award (in addition to a target award) for each Designated Participant will be approved by the Committee and set forth in each Designated Participant’s Award Agreement.
Performance Goal	The Company must achieve an initial threshold level of performance (the “Performance Goal”) in order for any Performance Shares to be earned. The Performance Goal is the achievement of at least 80% of the GAAP revenue target set forth in the Board-approved 2010 annual operating plan. ·    If the Performance Goal is not met, no Performance Shares will be earned under the Program. ·If the Performance Goal is met, Designated Participants will be credited with their Maximum Awards, subject to a reduction based on the achievement of Other Performance Goals which will determine the Actual Award earned.
Other Performance Goals	The Other Performance Goals are the five sets of strategic objectives approved by the Committee.
Actual Award Determination	The Maximum Award will be reduced to equal the number of Performance Shares earned as an Actual Award based on the achievement of the Other Performance Goals.  For each set of Other Performance Goals:
	Other		Number of		Other		Actual
	Performance Goal	x	Performance Shares	x	Performance Goal	=	Performance
	Weight (20%)		in Target Award		Achievement %		Shares
	·    All five sets of Other Performance Goals are weighted equally (20%).
	·    The Other Performance Goal Achievement % for each set of Other Performance Goals is capped at 150%.
	The Actual Award earned equals the sum of the Actual Performance Shares determined using the equation above for all five sets of Other Performance Goals. Any partial share of an Actual Award shall be rounded up to the next whole share.

EX-10.4

Exhibit 10.4

ADOBE SYSTEMS INCORPORATED

EXECUTIVE ANNUAL INCENTIVE PLAN

FISCAL YEAR 2010

Purpose:

As part of the total compensation program, Adobe has designed an annual cash-based incentive plan for its 2010 fiscal year for certain executive officers. This Executive Annual Incentive Plan (“AIP”) operates under, and is part of, the Adobe Systems Incorporated Executive Cash Performance Bonus Plan, which has been approved by Adobe’s Board of Directors and stockholders. The AIP is designed to drive revenue growth and operating profits, encourage accountability, drive execution of long-term strategy and annual operating plan objectives, and recognize and reward executives upon the achievement of our objectives.

Eligibility:

Executive officers of the Company who are employed (full time or part time) during the eligibility period (fiscal year), who are at least Senior Vice President level, and who are regular employees of Adobe at the end of the eligibility period are eligible to participate in the AIP.  If an executive officer is hired after the beginning of the AIP eligibility period and the Committee determines that such executive should be eligible to earn compensation under the AIP, the executive officer’s Target Award will be pro-rated based on the actual earned salary during the AIP eligibility period — that is, the Target Award will be calculated by reference to actual salary earned during the AIP eligibility period.  If the executive officer’s salary and/or AIP annual bonus target percent changes during the AIP eligibility period, the officer’s Target Award will be pro-rated based on those adjusted figures as follows:  the Target Award will be based on the number of days in the AIP period with the former AIP annual bonus target percent/earned salary and the number of days in the AIP eligibility period with the new AIP annual bonus target percent/earned salary.  If the executive’s employment terminates before the end of the AIP eligibility period, the executive will not be eligible for a bonus payment, or any portion of a bonus payment, except as provided in an applicable severance plan or in an individual retention agreement with an executive.  If an executive is on a leave of absence for the entire AIP eligibility period, the executive is not eligible for an AIP bonus.  If the executive officer is on a leave of absence for a portion of the AIP eligibility period, the officer will be eligible for a bonus under the AIP based on actual salary earned during the fiscal year (exclusive of any salary replacement benefits paid during the leave via insurance) — that is, the Target Award will be calculated by reference to the actual salary earned during the AIP eligibility period.

Employees Covered by Internal Revenue Code Section 162(m):

Notwithstanding the foregoing eligibility provisions, to the extent it determines to be necessary or desirable to achieve full deductibility of bonus compensation awarded under the AIP, the Committee, in its sole discretion, (i) may exclude from participation under the AIP those individuals who are or who may likely be “covered employees” under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) whose employment in an eligible position commenced after the Committee established the Threshold Goal (described below), which generally will be a date not later than the 90th day of the AIP eligibility period and (ii) may take other actions as necessary to ensure deductibility of the compensation paid under the AIP.

HOW THE AIP WORKS

AIP Components:

Target Award, Maximum Award, Threshold Goal, Corporate Result, Individual Result, and Actual Award

Target Award:

An annual bonus target percent is designated for each eligible participant by the Committee.  Each participant’s Actual Award (as defined below) is calculated, in part (as further described below), by reference to his or her “Target Award.”  The Target Award equals the product of the annual bonus target percent and the actual base salary earned by the participant in the fiscal year.  For example, a Senior Vice President whose annual bonus target percent is 60% and whose actual earned annual base salary is $400,000 would have his Actual Award calculated by reference to a Target Award of $240,000 ($400,000 x 60%).  The Target Award is the amount that would be earned under the AIP upon achievement at the 100% level of both the Corporate Result and the Individual Result.

Maximum Award:

No executive may earn a bonus in excess of 200% of his or her Target Award (and in no event more than $5 million) (“Maximum Award”).

Funding the Bonus Pool:

If the Threshold Goal is attained, the AIP will be funded at 200% of the Target Award for all participants, and each participant will be credited with the Maximum Award.  The Company is under no obligation to pay out the entire funding of the bonus pool.

The Threshold Goal is defined as achievement during FY 2010 (the “Performance Period”) of at least 90% of the Company’s budgeted GAAP revenue target (“GAAP Revenue”), disregarding the effects of any material acquisitions not incorporated into the operating plan, as set forth in the annual operating plan approved by Adobe’s Board of Directors at the beginning of the fiscal year.  If the Company does not achieve the Threshold Goal, the AIP will not be funded and eligible executives will earn no bonus under the AIP.  If the Company achieves the Threshold Goal, executives will be credited with a Maximum Award (as defined below) that will be adjusted downward to the Actual Award.

Determination of Actual Award:

Upon the funding of the AIP and crediting of the Maximum Award, the Company will determine the actual award earned by that participant (the “Actual Award”) by reducing the Maximum Award based on (i) achievement against specific Company financial goals, as reflected by the calculation of the Corporate Result (defined below), and (ii) achievement against individual performance goals reflected by the calculation of the Individual Result (defined below).  In addition, the Actual Award is subject to further adjustment as described below under “Additional Adjustments to Actual Awards.”

Specifically, each executive’s Actual Bonus under the AIP is reduced from the Maximum Award based on a formula that multiplies the executive’s Target Award by the 1) Corporate Result (capped, for purposes of this element of the formula, at 100%), and 2) by that executive’s Individual Result.

Corporate Result:

If the Company has achieved the Threshold Goal, the Corporate Result is determined by calculating the applicable percentage under the AIP matrix based on the Company’s achievement of both Adjusted Non-GAAP Operating Profit (that is, Non-GAAP operating profit, adjusted to include the operating profit associated with shippable backlog at the end of the fiscal year and to exclude profit sharing, quarterly incentive plan payments and annual incentive plan payments, as well as the effects of any material acquisitions not incorporated into the operating plan; Adobe’s Non-GAAP operating profit excludes the stock-based compensation impact of Statements of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123R”), “Share Based Payment,” deferred compensation expense, restructuring charges, and amortization of purchased intangibles, technology license arrangements and incomplete technology) and Adjusted Revenue (that is, GAAP Revenue, adjusted to reflect shippable backlog at the end of the fiscal year and to disregard the effects of any material acquisitions not incorporated into the operating plan).  Achievement of Adjusted Non-GAAP Operating Profit and Adjusted Revenue is determined by reference to the respective targets for such measures set forth in the annual operating plan approved by Adobe’s Board of Directors at the beginning of the fiscal year.

Individual Result:

The Committee, in consultation with the CEO (other than with respect to his own performance), determines each participant’s “Individual Result” multiplier (expressed as a percentage not to exceed 200%), based in part on that executive’s achievement of certain goals selected for such executive at the beginning of the AIP eligibility period, with such goals weighted in the sole discretion of the Committee.  The Individual Result multiplier is capped at 100% if the Corporate Result (per the AIP matrix) does not exceed 100%.  In addition, if the Corporate Result exceeds 100%, the Individual Result multiplier may also reflect, in the Committee’s discretion, the individual’s contribution toward the

2

achievement of the Corporate Result level in excess of 100%.  No participant will earn an Actual Award under the AIP in excess of his or her Target Award unless the Corporate Result exceeds 100% and the participant’s overall individual results exceed 100%.

Additional Adjustments to Actual Awards:

A 5% reduction will be applied to the Actual Award otherwise earned by any executive who fails to meet the annual performance appraisal submission deadline. A separate 5% reduction will be applied to the Actual Award that would otherwise be earned by any executive who fails to timely complete mandatory training during the fiscal year.

Administration:

Actual Awards earned are paid on an annual basis approximately 45-60 days after fiscal year-end, but in all cases in compliance with the short term deferral exception from Section 409A of the Internal Revenue Code of 1986, as amended.  Participation in the AIP is at the discretion of the Committee, in consultation with Company management.  The Company reserves the right to interpret and to make changes to or withdraw the AIP at any time, subject to applicable legal requirements.  All terms and conditions of the AIP are subject to compliance with applicable law

3

PAYMENT AWARD CALCULATION EXAMPLES:

	Corporate Result Exceeds	Corporate Result Equal to	Corporate Result Exceeds	Corporate Result Less than
	100%; Individual Result	100%; Individual Result	100%; Individual Result	100%; Individual Result
Example (Director)	Exceeds 100%	Exceeds 100%	Below 100%	Exceeds 100%
Earned Salary	$200,000	$200,000	$200,000	$200,000
Target Award	$200,000 x 30% = $60,000	$200,000 x 30% = $60,000	$200,000 x 30% = $60,000	$200,000 x 30% = $60,000
Threshold Goal (% of GAAP Revenue)	90% of GAAP Revenue	90% of GAAP Revenue	90% of GAAP Revenue	90% of GAAP Revenue
Hypothetical Performance Against Adjusted Revenue & Adjusted Non-GAAP Operating Profit Per Matrix	103% Adjusted Revenue, 107% Adjusted Non-GAAP Operating Profit = 132% Corporate Result Achievement	100% Adjusted Revenue, 100% Adjusted Non-GAAP Operating Profit = 100% Corporate Result Achievement	103% Adjusted Revenue, 107% Adjusted Non-GAAP Operating Profit = 132% Corporate Result Achievement	95% Adjusted Revenue, 95% Adjusted Non-GAAP Operating Profit = 75% Corporate Result Achievement
Corporate Result Multiplier (Capped at 100% per Formula)	100%	100%	100%	75%
Hypothetical Individual Goal Achievement	125%	125%	75%	125%
Hypothetical Individual Result Multiplier	125% (32% overachievement on Corporate Result may be taken into account in determining the Individual Result)	100% (Multiplier is limited to 100% since Corporate Result did not exceed 100%)	75%	100% (Multiplier is limited to 100% since Corporate Result did not exceed 100%)
Actual Award Calculation Example	$60,000 x 100% Corporate Result x 125% Individual Result = $75,000	$60,000 x 100% Corporate Result x 100% Individual Result = $60,000	$60,000 x 100% Corporate Result x 75% Individual Result = $45,000	$60,000 x 75% Corporate Result x 100% Individual Result = $45,000

4

AIP CORPORATE RESULT MATRIX:

AIP Matrix			90% Gate		Revenue
Operting Profit $s			90%		91%		92%		93%		94%		95%		96%		97%		98%		99%		100%		101%		102%		103%		104%		105%		106%		107%		108%		109%		110%
75% Gate	125	%	166	%	168	%	169	%	171	%	173	%	175	%	176	%	178	%	180	%	182	%	183	%	186	%	189	%	192	%	195	%	198	%	200	%	200	%	200	%	200	%	200	%
	124	%	163	%	164	%	166	%	168	%	170	%	171	%	173	%	175	%	177	%	178	%	180	%	183	%	186	%	189	%	192	%	194	%	197	%	200	%	200	%	200	%	200	%
	123	%	159	%	161	%	163	%	164	%	166	%	168	%	170	%	171	%	173	%	175	%	177	%	180	%	182	%	185	%	188	%	191	%	194	%	197	%	200	%	200	%	200	%
	122	%	156	%	158	%	159	%	161	%	163	%	165	%	166	%	168	%	170	%	172	%	173	%	176	%	179	%	182	%	185	%	188	%	191	%	193	%	196	%	199	%	200	%
	121	%	153	%	154	%	156	%	158	%	160	%	161	%	163	%	165	%	167	%	168	%	170	%	173	%	176	%	179	%	182	%	184	%	187	%	190	%	193	%	196	%	199	%
	120	%	149	%	151	%	153	%	154	%	156	%	158	%	160	%	161	%	163	%	165	%	167	%	170	%	172	%	175	%	178	%	181	%	184	%	187	%	190	%	193	%	196	%
	119	%	146	%	148	%	149	%	151	%	153	%	155	%	156	%	158	%	160	%	162	%	163	%	166	%	169	%	172	%	175	%	178	%	181	%	183	%	186	%	189	%	192	%
	118	%	143	%	144	%	146	%	148	%	150	%	151	%	153	%	155	%	157	%	158	%	160	%	163	%	166	%	169	%	172	%	174	%	177	%	180	%	183	%	186	%	189	%
	117	%	139	%	141	%	143	%	144	%	146	%	148	%	150	%	151	%	153	%	155	%	157	%	160	%	162	%	165	%	168	%	171	%	174	%	177	%	180	%	183	%	186	%
	116	%	136	%	138	%	139	%	141	%	143	%	145	%	146	%	148	%	150	%	152	%	153	%	156	%	159	%	162	%	165	%	168	%	171	%	173	%	177	%	180	%	183	%
	115	%	133	%	134	%	136	%	138	%	140	%	141	%	143	%	145	%	147	%	148	%	150	%	153	%	156	%	159	%	162	%	164	%	167	%	170	%	173	%	176	%	180	%
	114	%	129	%	131	%	133	%	134	%	136	%	138	%	140	%	141	%	143	%	145	%	147	%	150	%	152	%	155	%	158	%	161	%	164	%	167	%	170	%	173	%	176	%
	113	%	126	%	128	%	129	%	131	%	133	%	135	%	136	%	138	%	140	%	142	%	143	%	146	%	149	%	152	%	155	%	158	%	161	%	164	%	167	%	170	%	173	%
	112	%	123	%	124	%	126	%	128	%	130	%	131	%	133	%	135	%	137	%	138	%	140	%	143	%	146	%	149	%	152	%	154	%	157	%	161	%	164	%	167	%	170	%
	111	%	119	%	121	%	123	%	124	%	126	%	128	%	130	%	131	%	133	%	135	%	137	%	140	%	142	%	145	%	148	%	151	%	154	%	157	%	161	%	164	%	167	%
	110	%	116	%	118	%	119	%	121	%	123	%	125	%	126	%	128	%	130	%	132	%	133	%	136	%	139	%	142	%	145	%	148	%	151	%	154	%	157	%	160	%	164	%
	109	%	113	%	114	%	116	%	118	%	120	%	121	%	123	%	125	%	127	%	128	%	130	%	133	%	136	%	139	%	142	%	145	%	148	%	151	%	154	%	157	%	160	%
	108	%	109	%	111	%	113	%	114	%	116	%	118	%	120	%	121	%	123	%	125	%	127	%	130	%	132	%	135	%	138	%	141	%	145	%	148	%	151	%	154	%	157	%
	107	%	106	%	108	%	109	%	111	%	113	%	115	%	116	%	118	%	120	%	122	%	123	%	126	%	129	%	132	%	135	%	138	%	141	%	145	%	148	%	151	%	154	%
	106	%	103	%	104	%	106	%	108	%	110	%	111	%	113	%	115	%	117	%	118	%	120	%	123	%	126	%	129	%	132	%	135	%	138	%	141	%	145	%	148	%	151	%
	105	%	99	%	101	%	103	%	104	%	106	%	108	%	110	%	111	%	113	%	115	%	117	%	120	%	122	%	125	%	129	%	132	%	135	%	138	%	141	%	144	%	148	%
	104	%	96	%	98	%	99	%	101	%	103	%	105	%	106	%	108	%	110	%	112	%	113	%	116	%	119	%	122	%	125	%	129	%	132	%	135	%	138	%	141	%	144	%
	103	%	93	%	94	%	96	%	98	%	100	%	101	%	103	%	105	%	107	%	108	%	110	%	113	%	116	%	119	%	122	%	125	%	129	%	132	%	135	%	138	%	141	%
	102	%	89	%	91	%	93	%	94	%	96	%	98	%	100	%	101	%	103	%	105	%	107	%	110	%	113	%	116	%	119	%	122	%	125	%	129	%	132	%	135	%	138	%
	101	%	86	%	88	%	89	%	91	%	93	%	95	%	96	%	98	%	100	%	102	%	103	%	106	%	110	%	113	%	116	%	119	%	122	%	125	%	129	%	132	%	135	%
	100	%	83	%	84	%	86	%	88	%	90	%	91	%	93	%	95	%	97	%	98	%	100	%	103	%	106	%	109	%	113	%	116	%	119	%	122	%	125	%	128	%	132	%
	99	%	79	%	81	%	83	%	84	%	86	%	88	%	90	%	91	%	93	%	95	%	97	%	100	%	103	%	106	%	109	%	113	%	116	%	119	%	122	%	125	%	128	%
	98	%	76	%	78	%	79	%	81	%	83	%	85	%	86	%	88	%	90	%	92	%	94	%	97	%	100	%	103	%	106	%	109	%	113	%	116	%	119	%	122	%	125	%
	97	%	73	%	74	%	76	%	78	%	80	%	81	%	83	%	85	%	87	%	88	%	90	%	94	%	97	%	100	%	103	%	106	%	109	%	113	%	116	%	119	%	122	%
	96	%	69	%	71	%	73	%	74	%	76	%	78	%	80	%	81	%	83	%	85	%	87	%	90	%	94	%	97	%	100	%	103	%	106	%	109	%	113	%	116	%	119	%
	95	%	66	%	68	%	69	%	71	%	73	%	75	%	76	%	78	%	80	%	82	%	84	%	87	%	90	%	93	%	97	%	100	%	103	%	106	%	109	%	112	%	116	%
	94	%	63	%	64	%	66	%	68	%	70	%	71	%	73	%	75	%	77	%	79	%	81	%	84	%	87	%	90	%	93	%	97	%	100	%	103	%	106	%	109	%	112	%
	93	%	59	%	61	%	63	%	64	%	66	%	68	%	70	%	71	%	73	%	76	%	78	%	81	%	84	%	87	%	90	%	93	%	97	%	100	%	103	%	106	%	109	%
	92	%	56	%	58	%	59	%	61	%	63	%	65	%	66	%	68	%	70	%	72	%	74	%	78	%	81	%	84	%	87	%	90	%	93	%	97	%	100	%	103	%	106	%
	91	%	53	%	54	%	56	%	58	%	60	%	61	%	63	%	65	%	67	%	69	%	71	%	74	%	78	%	81	%	84	%	87	%	90	%	93	%	97	%	100	%	103	%
	90	%	49	%	51	%	53	%	54	%	56	%	58	%	60	%	62	%	64	%	66	%	68	%	71	%	74	%	77	%	81	%	84	%	87	%	90	%	93	%	96	%	100	%
	89	%	46	%	48	%	49	%	51	%	53	%	55	%	57	%	59	%	61	%	63	%	65	%	68	%	71	%	74	%	77	%	81	%	84	%	87	%	90	%	93	%	96	%
	88	%	43	%	44	%	46	%	48	%	50	%	51	%	53	%	55	%	57	%	60	%	62	%	65	%	68	%	71	%	74	%	77	%	81	%	84	%	87	%	90	%	93	%
	87	%	39	%	41	%	43	%	44	%	46	%	48	%	50	%	52	%	54	%	56	%	58	%	62	%	65	%	68	%	71	%	74	%	77	%	81	%	84	%	87	%	90	%
	86	%	36	%	38	%	39	%	41	%	43	%	45	%	47	%	49	%	51	%	53	%	55	%	58	%	62	%	65	%	68	%	71	%	74	%	77	%	81	%	84	%	87	%
	85	%	33	%	34	%	36	%	38	%	40	%	42	%	44	%	46	%	48	%	50	%	52	%	55	%	58	%	61	%	65	%	68	%	71	%	74	%	77	%	80	%	84	%
	84	%	29	%	31	%	33	%	34	%	36	%	39	%	41	%	43	%	45	%	47	%	49	%	52	%	55	%	58	%	61	%	65	%	68	%	71	%	74	%	77	%	80	%
	83	%	26	%	28	%	29	%	31	%	33	%	35	%	37	%	39	%	41	%	44	%	46	%	49	%	52	%	55	%	58	%	61	%	65	%	68	%	71	%	74	%	77	%
	82	%	23	%	24	%	26	%	28	%	30	%	32	%	34	%	36	%	38	%	40	%	42	%	46	%	49	%	52	%	55	%	58	%	61	%	65	%	68	%	71	%	74	%
	81	%	19	%	21	%	23	%	25	%	27	%	29	%	31	%	33	%	35	%	37	%	39	%	42	%	46	%	49	%	52	%	55	%	58	%	61	%	65	%	68	%	71	%
	80	%	16	%	18	%	20	%	22	%	24	%	26	%	28	%	30	%	32	%	34	%	36	%	39	%	42	%	45	%	49	%	52	%	55	%	58	%	61	%	64	%	68	%
	79	%	13	%	14	%	16	%	18	%	20	%	23	%	25	%	27	%	29	%	31	%	33	%	36	%	39	%	42	%	45	%	49	%	52	%	55	%	58	%	61	%	64	%
	78	%	9	%	11	%	13	%	15	%	17	%	19	%	21	%	23	%	25	%	28	%	30	%	33	%	36	%	39	%	42	%	45	%	49	%	52	%	55	%	58	%	61	%
	77	%	6	%	8	%	10	%	12	%	14	%	16	%	18	%	20	%	22	%	24	%	26	%	30	%	33	%	36	%	39	%	42	%	45	%	49	%	52	%	55	%	58	%
	76	%	3	%	5	%	7	%	9	%	11	%	13	%	15	%	17	%	19	%	21	%	23	%	26	%	30	%	33	%	36	%	39	%	42	%	45	%	49	%	52	%	55	%
	75	%	0	%	2	%	4	%	6	%	8	%	10	%	12	%	14	%	16	%	18	%	20	%	23	%	26	%	29	%	33	%	36	%	39	%	42	%	45	%	48	%	52	%

5